Service and survival

Fri, 2009-03-06 12:25

“Providing excellent service is not only good for customers, but it also benefits dealers and automakers in terms of income from future service visits and sales.” –Jon Osborn, research director at J.D. Power and Associates

There is absolutely no doubt in my mind that good customer service begets long-term business relationships. Whether you’re a trucking fleet or dealership, etc., everyone intrinsically understands this maxim. We can – and should – argue all day about how pricing often times trumps service, but in the end, service I think wins out. Now, however, there’s proof to back that concept up.

An ongoing study by J.D. Power and Associates finds that the highest-performing automotive brands on the vehicle service side of the ledger retain more than 80 percent of their customer maintenance and repair dollars within their dealer network, compared with retention rates of less than 60 percent for lower-performing brands.

J.D. Power’s 2009 Customer Service Index (CSI) Study – now in its 29th year – examines satisfaction among vehicle owners who visit a service department for maintenance or repair work and bases its rankings on dealer performance during the first three years of ownership; a time period that typically represents the majority of the vehicle warranty period. Five measures are examined to determine overall customer satisfaction with dealer service, listed in order of importance: service quality; service initiation; service advisor; service facility; and vehicle pickup.

It’s a big, global study, too -- based on responses from 106,059 owners and lessees of 2004 to 2008 model-year vehicles from various countries around the world, including Australia, Canada, China, France, Germany, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, the Philippines, South Africa, Taiwan, Thailand and the United Kingdom and (of course) the U.S.

Surprise, surprise – vehicle brands with dealers that achieve particularly high CSI scores (800 or higher) during the first three years of vehicle ownership retained 79 percent of dollars spent on maintenance and repairs during the first five years of ownership. In contrast, brands that attained CSI scores below 800 retained only 69 percent of customer maintenance and repair dollars.

The gulf between the top and bottom of J.D. Power’s CSI list, however, is strikingly small. This year for example, Lexus ranked highest in customer satisfaction with dealer service – improving from fourth place last year – a with an overall CSI score of 835 on a 1,000-point scale. Rounding out the top five nameplates are Jaguar (810), BMW (808), Cadillac (806) and Acura (805).

Yet the brands on the bottom are in some cases less than 100 points off from the leaders – Nissan (723), Mazda (716), and Suzuki (702). That tells me the margin for error in terms of customer service satisfaction is very small – and the effects of poor service can snowball in a hurry.

There’s a monetary impact to all of this as well (not surprisingly) as J.D. Power’s reports consumers spend an average of $310 annually on oil changes, routine maintenance and repairs during the first five years of vehicle ownership. Higher satisfaction with dealers leads to a dramatically lower likelihood to spend this money on visits to non-dealer service facilities. However, customers who say the dealer service they received was "unacceptable" report spending EIGHT times as much at non-dealer service facilities, compared with customers who report receiving "truly exceptional" service from their dealer.

"Since dealer service is the last touch point in the vehicle ownership cycle that auto manufacturers have with customers, providing superior levels of service can leave owners with a lasting favorable impression of the brand," said Jon Osborn, J.D. Power’s research director. “The significant decline in new-vehicle sales means that dealers are relying even more heavily on the service-operations side of their business for much-needed revenue. In many cases, this income is keeping the dealerships open. With the stakes so high, it is imperative for dealers to focus heavily on maximizing satisfaction levels."

So what separates the best from the rest? Osborn said the data indicated several practices that the highest-ranked brands consistently perform that help elevate customer service satisfaction levels.

“Those include providing prompt service appointments; greeting the customer immediately on arrival; knowing the vehicle's service history; returning vehicles to customers in a clean condition; and offering alternative transportation to customers leaving their cars for service,” he noted. “These courtesies may seem intuitive, but many dealers do not provide them consistently. We find that they are very effective in raising customer satisfaction, provided that the service work performed on the vehicle is also satisfactory."

Here’s the kicker: The study finds that although satisfaction with dealer service tends to decline as vehicles age – particularly during the fourth and fifth years of ownership – yet those automakers whose dealers provide the highest levels of satisfaction during the warranty period retain a greater share of future service visits at the dealership, even after the warranty period expires.

Sure, this study focuses on car dealerships – and we all know commercial trucks are very different animals. But I think the lessons here translate directly to the trucking business – that the finer points of good customer service helps to retain business from customers for the long haul. And lord knows, in this economy, you need all the long-term loyal customers you can get.